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Trends in quality-adjusted skill premia in the United States, 1960-2000

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  • Pedro Carneiro

    ()
    (Institute for Fiscal Studies and University College London)

  • Sokbae 'Simon' Lee

    ()
    (Institute for Fiscal Studies and University College London)

Abstract

This paper presents new evidence that increases in college enrollment lead to a decline in the average quality of college graduates between 1960 and 2000, resulting in a decrease of 8 percentage points in the college premium. The standard demand and supply framework (Katz and Murphy, 1992, Card and Lemieux, 2001) can qualitatively account for the trend in the college and age premia over this period, but the quantitative adjustments that need to be made to account for changes in quality are substantial. Furthermore, the standard interpretation of the supply effect can be misleading if the quality of college workers is not controlled for. To illustrate the importance of these adjustments, we reanalyze the problem studied in Card and Lemieux (2001), who observe that the rise in the college premium in the 1980s occurred mainly for young workers, and attribute this to the differential behavior of the supply of skill between the young and the old. Our results show that changes in quality are as important as changes in prices to explain the phenomenon they document.

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File URL: http://cemmap.ifs.org.uk/wps/cwp0209_2.pdf
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Bibliographic Info

Paper provided by Centre for Microdata Methods and Practice, Institute for Fiscal Studies in its series CeMMAP working papers with number CWP02/09.

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Date of creation: Jan 2009
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Handle: RePEc:ifs:cemmap:02/09

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As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Trends in Quality-Adjusted Skill Premia in the United States, 1960-2000
    by maximorossi in NEP-LTV blog on 2010-11-23 17:10:57
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
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Cited by:
  1. MORIKAWA Masayuki, 2012. "Postgraduate Education and Human Capital Productivity in Japan," Discussion papers 12009, Research Institute of Economy, Trade and Industry (RIETI).
  2. Lustig, Nora & Lopez-Calva, Luis F. & Ortiz-Juarez, Eduardo, 2013. "Deconstructing the decline in inequality in Latin America," Policy Research Working Paper Series 6552, The World Bank.
  3. Gregory Kurtzon, 2012. "Ability Composition Effects on the Education Premium," Working Papers 456, U.S. Bureau of Labor Statistics.
  4. Antonczyk, Dirk & DeLeire, Thomas & Fitzenberger, Bernd, 2010. "Polarization and Rising Wage Inequality: Comparing the U.S. and Germany," IZA Discussion Papers 4842, Institute for the Study of Labor (IZA).
  5. Joanne Lindley & Stephen Machin, 2011. "Rising Wage Inequality and Postgraduate Education," CEP Discussion Papers dp1075, Centre for Economic Performance, LSE.
  6. Bratti, Massimiliano & Leombruni, Roberto, 2009. "Local Human Capital Externalities and Wages at the Firm Level: The Case of Italian Manufacturing," IZA Discussion Papers 4613, Institute for the Study of Labor (IZA).
  7. Lindley, Joanne, 2012. "The gender dimension of technical change and the role of task inputs," Labour Economics, Elsevier, vol. 19(4), pages 516-526.
  8. Pedro Carneiro & Sokbae 'Simon' Lee, 2009. "Estimating distributions of potential outcomes using local instrumental variables with an application to changes in college enrollment and wage inequality," CeMMAP working papers CWP01/09, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
  9. MORIKAWA Masayuki, 2013. "Postgraduate Education, Labor Participation, and Wages: An empirical analysis using micro data from Japan," Discussion papers 13065, Research Institute of Economy, Trade and Industry (RIETI).
  10. Aitor Lacuesta & Sergio Puente & Ernesto Villanueva, 2011. "The schooling response to a sustained increase in low-skill wages: evidence from Spain 1989-2009," Banco de Espa�a Working Papers 1208, Banco de Espa�a.
  11. Bonfatti, Roberto & Ghatak, Maitreesh, 2013. "Trade and the allocation of talent with capital market imperfections," Journal of International Economics, Elsevier, vol. 89(1), pages 187-201.
  12. DEIDDA, Luca G. & PAOLINI , Dimitri & ,, 2013. "Wage premia, education race, and supply of educated workers," CORE Discussion Papers 2013062, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).

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